Nearly eight years after the rollout of Goods and Services Tax (GST), the Centre is preparing for its most significant restructuring yet. A new blueprint for GST 2.0 proposes to do away with the existing 12% and 28% tax slabs, aiming to simplify the tax regime and reduce disputes. The plan will be reviewed by a group of state finance ministers next week before being placed before the GST Council.
Under the proposal, a 5% slab will remain for essential goods, while most items from the 12% category are likely to be moved to either the nil or 5% bracket. Goods currently taxed at 28%—such as air conditioners, dishwashers, automobiles, cement, and select categories of TV sets—will be shifted to the 18% slab, except for sin and luxury goods, which will attract a special levy of up to 40%.
Officials said that food products, medicines, medical devices, stationery, and daily essentials would either become tax-free or be taxed at the lowest rate. Items typically consumed by the middle class, including electronics like refrigerators and high-end TVs, will continue under the 18% slab. However, special rates—such as 0.25% on diamonds and precious stones and 3% on jewellery—will remain to support specific industries.
The revamp comes ahead of the March deadline, when the compensation cess to states is set to expire. By eliminating the 12% and 28% slabs, the government expects to make the tax structure less complex and improve compliance.
What Will Change for Consumers
- Items like jams, fruit juices, namkeens, medicines, spectacles, and notebooks (currently under 12%) will likely see tax relief.
- High-value consumer durables and cement (currently under 28%) will move to 18%.
- Sin goods such as tobacco, pan masala, and aerated drinks will face a 40% GST plus cess.
Impact on Revenue and Industry
At present, 65% of GST revenue comes from the 18% slab, while the 28% category contributes about 12%. The shift is expected to balance revenue without burdening consumers. Sources indicate that the weighted average GST rate, currently 11.6%, may fall further.
Experts believe this restructuring will resolve long-pending disputes over classification of products like parathas, cakes, and sweets, which often faced confusion due to varying ingredients.
A senior official said, “This will be a modern, streamlined GST. Almost all items now taxed at 12% and 28% will move to 5% or 18%, making compliance simpler and reducing litigation.”
Mariya is the Senior Editor at Juris Hour. She has 5+ years of experience on covering tax litigation stories from the Supreme Court, High Courts and various tribunals including CESTAT, ITAT, NCLAT, NCLT, etc. Mariya graduated from MLSU Law College, Udaipur (Raj.) with B.A.LL.B. and also holds an LL.M. She started as a freelance tax reporter in the leading online legal news companies like LiveLaw & Taxscan.
